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One commodity that has captured investors’ minds this year is gold.
The precious metal has been on a roll in 2025. At its high on April 22, it briefly burst through the $3,500 level. That represented a 33% gain since the start of the year.
The gold bugs came out in force, calling for it to break out even higher.
But gold has a way of disappointing even its most ardent supporters. After it surged through $3,500, it turned around and headed the other way.
After a resurgence earlier this month, gold petered out, locking in a lower high… And falling momentum pulled it lower.
To be clear, it doesn’t mean the underlying trend has collapsed. But gold traders need to remain wary and only take the right setups.
So what can we expect from here?
Blow-Off Volume
The SPDR Gold Shares ETF (GLD) flatlined at the start of 2025. Then it resumed its long-term uptrend in early January.
Although you can’t see it in the chart below, GLD’s rally began in October 2022. That’s when it broke off short-term support at the $150 level.
And after a short, sharp reversal in early April this year, GLD rebounded strongly from just above the 50-day Moving Average (MA, blue line)…
SPDR Gold Shares ETF (GLD)
Source: e-Signal
That move coincided with the Relative Strength Index (RSI) – a momentum indicator – forming a major ‘V’ right around support (green line).
As momentum surged, GLD rocketed 16.5% higher in just two weeks – a big move for gold. It also represented a 110%-plus move from when its rally began in 2022.
But just as new buyers were rushing into GLD in fear of missing out, GLD reversed. The RSI inverted from overbought territory (dark arrow). This reversal pattern often repeats as you look back through the chart.
After reversing off that high, GLD held support (green line) before buying momentum again pushed it higher. But that move flamed out and reversed at a lower high.
Now the RSI is again tracking near support. So let’s look at what gold investors should look for around here…
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Watch Support
The chart shows two distinct rally phases: from June through October last year… then January through current day.
Apart from a brief period in between these two phases (when GLD flatlined), the RSI stayed in its upper band above the green line as GLD rallied…
And the 10-day MA (red line) tracked above and pulled the 50-day MA higher.
For GLD to resume its rally, I’ll watch for the RSI to hold support and push GLD higher as buying momentum rises into its upper band.
I’ll also be on the lookout for the 10-day MA to start accelerating above the 50-day MA.
As the chart shows, the key with gold is to wait for a pullback… then ride on the back of rising momentum.
We want to avoid entering a trade when the RSI is near overbought territory, as that typically precedes a pullback.
We also need to ignore the hype each time gold hits a new milestone. That often sucks you into a poor entry just before it reverses.
Yet gold is an interesting commodity to trade right now. And if you can get your head around these signals, it will put the odds much more in your favor.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
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